At Price Hill & Co Limited, we aim to maximise the take home pay of our clients. We use different mix of tax strategies to ensure that our clients take advantage of all legally available expenses and allowances.

IT Contractors and freelance workers can take advantage of the HMRC approved mileage scheme (Subject to certain conditions)

Under normal rules for “Employees”, travel from home to work is not allowed.
Indeed section 337 of Income Tax (Earnings and Pensions) Act 2003 clearly confirms this rule.

The Courts have established as a clear general principle that the cost of travelling from an employee’s home to his or her normal place of work is not travel in the performance of the duties. The expense merely puts the employee into a position to perform his or her duties.

The cases that have established this principle are:
Cook v Knott
Revell v Directors of Elworthy Bros & Co Ltd
Andrews v Astley
Ricketts v Colquhoun

However IT Contractors are in a unique position in that they are able to claim that their home is their normal place of work. Therefore travel to “Client Site” is actually travel from their normal place of work (Home) and therefore an allowable expense.

HMRC Approved mileage scheme rates:-

From 2011/12

First 10,000 business miles in the tax year

Each business mile over 10,000 in the tax year

Cars and vans

45p

25p

Motor cycles

24p

24p

Bicycles

20p

20p

Worked Example:

Assume a contractor travel from Work (Home) to “Client Site” and does 12,000 miles from 6th April to 5th April the following year.

First 10,000 miles at 45p per mile = £4,500
Remaining 2,000 miles at 25p per mile = £500
Total claim: £4,500 + £500 = £5,000

This means that a Contractor can draw out £5,000 from the Business Bank account and transfer to their personal account without incurring any taxes. There is no Income tax, no Corporation tax .
This amount is legally available.

Condition
However the contractors have to meet the conditions of Temporary contract.

Many accountants fail to inform their clients that there is a condition attached to the Mileage Scheme and therefore they fall foul of the HMRC rules.